During a well-attended session yesterday, Lee Peterson, executive vice president of brand, strategy and design for customer experience specialists WD Partners, discussed the ongoing transformation of bricks-and-mortar stores. He began with a quote from Jeff Bezos: “You can explain things to people, but you can’t understand things to people.”
What Bezos meant by this koan, Peterson said, is that while people may be aware that X, Y or Z is happening — in this case, the change in the nature and purpose in physical stores over the past 20 years — they may not understand why it is happening. WD Partners recently concluded a research study of 4,000 consumers, seeking a closer understanding of why stores have changed and how they need to change in the future.
The basic conclusion of the study, he said, is that retail as we know it is over; perhaps the best evidence of this is the statistics surrounding online shopping and store visits. The online share of total retail is growing, and approximately 90 percent of all retail purchases still take place in stores. (WD Partners takes issue with this number, Peterson said, pointing out that removing auto dealers, restaurants and other venues in which online selling is impractical would result in the actual online share of current retail spending being significantly higher than 10 percent.)
However large that number is, what does it mean? While retail sales are up, foot traffic in stores has been going down 10 percent year-over-year “since the Great Recession,” i.e. for the last decade or so. “Physical retail is no longer about the distribution of goods,” he said, “but about building brand equity.” Brands such as Vans and Dr. Martens have stores with no merchandise; they exist for people to socialize in or otherwise use as a gathering place, and along the way to increase their affinity for the brand.
Another new role for stores, Peterson noted, is click-and-collect: Order online and pick up in the store. Yet another is online order fulfillment; in many cases it’s easier and cheaper to ship an item from a store’s inventory than from an online distribution center.
With that as background, he launched into a high-speed description of the new WD Partners research study. “About 8,000 stores closed in 2018,” he said. “What do we do with the empty stores? How do we get the people back?” To begin to answer that question, the study asked participants what could replace a shuttered and empty anchor store that would cause them to return to a mall.
WD Partners divided the study population into two groups — digital natives (29 years old and younger) and digital immigrants (47 and older) — and gave them a list of possible new tenants for the vacant anchor store space. The top responses from the digital natives included food hall, farmers market, green space, BOPIS or click-and-collect, indoor sports arena, fitness center and coworking space. And then there was an aggregate question: “If we added all these things and made a center out of them, would you go there?” Sixty-four percent said yes.
Last fall Walmart announced it was converting parking-lot space in some of its locations to “Walmart town centers,” which are, basically, what Peterson was describing. The transformation of stores continues.